Dixon Technologies India Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Dixon Technologies India Ltd (DIXON) Q2 FY24 Earnings Concall

• Financial Performance
  • Consolidated revenues grew 28% year-over-year to INR4,943 crores in Q2 FY24.
  • Consolidated EBITDA grew 37% to INR200 crores and PAT grew 47% to INR113 crores in Q2 FY24.
  • Expanded ROC to 32.9% and ROE to 24.4% as of Sept 2023 through earnings improvement and working capital management.
• Business Segment Growth
  • Consumer electronics revenues were down 4% YoY to INR1,440 crores.
  • Mobile & EMS revenues grew 77% YoY to INR2,819 crores driven by orders from Jio, Motorola, Nokia.
  • Home appliances revenues grew to INR364 crores through new products and backward integration.
  • Wearables revenues strong at INR385 crores with healthy order book.
• Strategic Partnerships and New Businesses
  • Entered into key partnerships with Google for ODM TVs, Samsung for Tizen OS TVs.
  • Started manufacturing smartphones for Xiaomi in new Noida facility.
  • Secured large order from Reliance Jio for 4G Jio Bharat phones.
  • Forayed into manufacturing laptops, tablets and exploring new categories.
• Investments in Capacity Expansion
  • Expanded capacities across businesses like mobile phones, security systems, telecom products.
  • Investing INR150 crores for laptop & tablet manufacturing under PLI scheme.
  • Added capacity for manufacturing refrigerators, expected to start production by Q4 FY24.
• Mobile Business Growth
  • Mobile segment is seeing sharp acceleration this quarter due to domestic demand and new customer acquisitions like Xiaomi and itel.
  • Commercial production for Xiaomi smartphones will start next month. Further growth expected from Nokia feature phone exports.
  • Dixon is in discussions with a couple of other large global brands which could get finalized in the next quarter.
  • Mobile expected to contribute 60-70% of revenues over next few years.
  • Looking to add new domestic and global mobile brands, starting with domestic market.
• Lighting Business Challenges
  • LED bulb business declined due to overall market shrinkage and some loss in market share.
  • However, Dixon has grown in other lighting categories like battens, ceiling lights, down lighters.
  • Main reason for LED bulb decline is the fall in overall volume and lower unit value.
• Consumer Electronics Outlook
  • Marginal growth expected in consumer electronics this fiscal closing at 3.6-3.7 million units versus 3.4 million last year.
  • Backward integration initiatives like injection molding plant and LED bulb manufacturing will add cost benefits.
• Strategic Priorities
  • Dixon wants to expand in higher margin products and components manufacturing.
  • Dixon’s large customer base in electronics generates cash for new investments.
  • Will look beyond consumer electronics for new growth engines in EMS segment.
• CapEx and Investments
  • Spent INR331 crores CapEx till September, expected INR500 crores for current fiscal.
  • Intensity likely lower next year, still budgeting and awaiting some approvals.
  • Exploring new businesses with higher margins despite some impact on return ratios.
• Working Capital Changes
  • Increase in Q2 due to business ramp-ups and seasonal factors.
  • Confident of generating 300 crores over next 3-4 months through improved working capital management.
  • No structural change in working capital cycle expected.
• Mobile Phone Manufacturing
  • Dixon started manufacturing for Xiaomi smartphones which will ramp up from next month.
  • Also started manufacturing for TECNO’s smartphone brand itel which will scale up in coming quarters.
  • Currently have capacity to manufacture 2.5 million smartphones and 5.5-6 million feature phones per month.
• Expansion in Product Portfolio
  • Started manufacturing LED TVs for Nokia, in addition to existing client Motorola.
  • Setup facility to manufacture refrigerators with capacity of 1.2 million units per year.
  • Production trials underway, expect commercial production to start in Q4FY24.